Power save your way to a down payment
With these helpful tips
Coming up with thousands of dollars for a down payment is tough. This is especially true if you are already struggling with student loans, car payments, credit card debt, and rent.
The higher your down payment is, the lower your monthly mortgage payment will be. While the amount required for a down payment depends on the type of loan, typically you will need to save anywhere from 5 to 20 percent of the sale price in cash.
While there are many ways to save money, here are some great tips to get you started saving towards a down payment…
Six ways to save for a down payment (or anything else)
Pay off credit card debt
If you try to apply for a mortgage with too much consumer debt, you won’t qualify. Plus, you can’t really save money if you’re busy paying a lot of interest to someone else.
The first thing you need to do is clear up all credit card debt. Start with the highest interest debt and work your way from there.
Click here to learn more about increasing your credit score
Once you start decreasing your balances, think about using cash. Studies have shown that people who pay for things with credit spend about 15% more than people who pay with cash.
Prioritize
Saving for something important—like a home—is all about priorities. If you like to eat out regularly, have the latest technology, watch cable TV, and shop until you drop, you will need to make a few changes.
Now is the time to identify where you can cut back and put more money into your savings account. The best way to do this is by having a budget. If you haven’t put one together, it’s time to create one!
Take the bus
If you can swing it, sell your car and take the bus (or ride your bike). You will save on fixed costs such as parking, insurance, gas, maintenance, and car payments. You will also avoid the risk of financially catastrophic repair bills.
If you have a partner and don’t currently share a vehicle, consider getting rid of the second vehicle and sharing one. Look into public transit and carpooling options.
For either situation, you can always park your car for a couple of months to see how it works.
Lay low
While you’re in super saver mode, look at dialing down your vacations. Choosing a staycation is a great way to save some money.
Or perhaps you only take one vacation this year and bank the rest of your vacation days. If there is the option of being paid out for vacation time, it’s a great way to pad your savings account.
However you choose to go about lowering your vacation costs, this is good practice for when you own a home and find that fancy vacations aren’t always possible without going into debt.
No pets
They certainly are cute and lovable, but pets can be costly. While this isn’t necessarily on a day-to-day basis, vet bills will blow your mind if something serious happens to Mr. Snuggles.
Protect your down payment fund! Wait to get your fur baby until after you purchase your home.
Move
Yes, you’re saving up to eventually move into your dream home. But where are you living now? Now is the time to be strategic and focused.
Can you downsize from a two bedroom to a one bedroom apartment or condo? Can you move closer to work or live in a cheaper neighbourhood? Can you get a roommate or move in with family? If the answer to any of these questions is yes, you will significantly save yourself money each month.
_____________________
When it comes to saving, making adjustments to your lifestyle and spending habits can be as minimal or as drastic as you want them to be. Start slow to test the waters, or just jump in! When it comes to saving money, you really can’t go wrong!
It’s worth looking into different types of savings account and whether there are incentives available for first time homebuyers. Consult with your financial institution, mortgage brokers, and your financial planner/advisor (if you have one) to see which options work best for you.
When you're ready to buy, give me a call. You can reach me directly at 250-702-0464